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July 30, 1998
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Internet Report: Is the Correction Ending? - Amazon.com, Infoseek, Lycos, Mindspring
The internet stocks continued their steep correction yesterday, with the largest percentage decline for most companies occurring after a week of steady depreciation. And after looking at the charts of these stocks, there is likely more downside: unfortunately, these stocks' charts have broken down, and the share prices will continue to fall toward the next support level. Infoseek's chart (NASDAQ: SEEK - research, message board) is quite interesting-- forming a bell with a base at $22 which is beginning to form a gigantic head-and-shoulders over the last 3 months similar to the formation at at the $30 support level which failed to result in a breakout rally. If the $22 support level hold over the next week, we may see a substantial breakout rally this second time.
Of note, the net stocks are seeing substantial late-session sell-offs which indicate that the correction is not over yet. Lycos (NASDAQ: LCOS - research, message board), Mindspring (NASDAQ: MSPG - research, message board), and Amazon.com (NASDAQ: AMZN - research, message board) all fell substantially-- but the next support levels for these stocks are at $48, $30, and $100.
Considering the high-levels of short-interest in these stocks, fast-downside moves must be expected. But of course, the upside rebound will occur just as fast. Hence, Infoseek looks incredibly attractive with a market cap of $740 million, especially when one looks down the road to when the company will be gaining Starwave which is conservatively valued at $400 million. Looking at the chart from the base at $22 back in early, the stock proceeded to double over the next three weeks-- which shows just how fast momentum can shift.
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